Entrepreneurs often seek out environments that allow them to maximize capital retention so they can fuel growth, innovation, and personal wealth. puerto rico tax incentives act60 have rapidly become a trending topic among startup founders, business owners, and digital nomads searching for a more favorable financial landscape. This blog explores how Act 60, also known as the Puerto Rico Tax Incentives Code, can benefit entrepreneurs by helping them retain more of what they earn.

What Is Puerto Rico’s Act 60?

Act 60, implemented in 2019, is an overhaul and consolidation of various tax benefits previously offered in Puerto Rico. The legislation was designed to attract new residents, investors, and businesses to stimulate the local economy by providing highly attractive tax breaks.

One of the main objectives of Act 60 is to position Puerto Rico as a competitive jurisdiction for entrepreneurs who wish to retain more of their capital and reinvest it into their ventures or personal portfolios. Entrepreneurs who establish residency and meet specific requirements can unlock a suite of compelling tax advantages.

The Tax Advantages That Matter Most

Substantially Reduced Individual Tax Rates

Entrepreneurs who relocate to Puerto Rico and qualify as bona fide residents can significantly reduce their individual income tax obligations. For certain types of qualifying income, including dividends and some types of interest, Act 60 allows for a tax rate of 0%. Capital gains generated after establishing residency in Puerto Rico can also be eligible for a 0% Puerto Rican tax rate, which can lead to substantial wealth accumulation over time.

Business Profit Retention

Act 60 creates an environment where businesses providing eligible export services can secure a fixed corporate tax rate as low as 4% on income derived from these services. Retaining a larger portion of business profits allows businesses to self-fund innovation, accelerate hiring, and support expansion without the heavy burden of higher corporate tax rates.

Entrepreneurs who structure their business activities appropriately can take advantage of these incentives to increase liquidity and financial resilience. This provides operational flexibility for founders looking to scale or hedge against market uncertainties.

Enhanced Capital Gains Treatment

One of the most attractive aspects of Puerto Rico’s Act 60 incentives is the treatment of long-term capital gains. For gains that accrue after an entrepreneur becomes a Puerto Rican resident, the tax rate may be reduced to 0%. This unique benefit means that founders, investors, and tech professionals can unlock immense value when liquidating positions, selling companies, or rebalancing portfolios.

How Act 60 Helps Businesses Stay Lean and Agile

Cash flow is the lifeblood of any startup or entrepreneurial venture. By granting serious tax advantages, Act 60 can allow entrepreneurs to hold onto more capital. This is especially important for fast-growing startups that need to invest quickly in new hires, product development, and market expansion.

Retaining capital through lower tax rates means companies can react to changing market conditions quickly. With higher retained earnings, startups in Puerto Rico can:

  • Expand operations without diluting ownership by raising outside funds.
  • Invest heavily in research and development.
  • Weather downturns or pivot their business models if market dynamics shift.
  • Offer competitive compensation to attract and retain top talent.